Consultation outcome

Proposed review of the 2023 scheme to control the cost of branded health service medicines

Updated 4 December 2023

This was published under the 2022 to 2024 Sunak Conservative government

Executive summary

The Department of Health and Social Care (the department) proposes to amend the statutory scheme for branded medicine pricing (known as the statutory scheme). This consultation document seeks views on the proposals, particularly from the pharmaceutical industry and NHS patients.

The statutory scheme is set out in legislation in The Branded Health Service Medicines (Costs) Regulations 2018 (the regulations). It is one of 2 schemes, alongside the 2019 voluntary scheme for branded medicines pricing and access (VPAS), that control the costs of branded medicines to the NHS.

A branded medicine is defined in the regulations. The definition refers to a medicine to which a brand name has been applied that enables the medicine to be identified without reference to the ‘common name’ (the generic or international non-proprietary name).

The department administers the 2019 VPAS and the statutory scheme on behalf of all UK nations and the payments that companies make under the scheme in respect of the UK are allocated to each of the 4 countries on an agreed basis each year.

VPAS is the latest in a series of voluntary agreements to control NHS spend on medicines going back to 1957. It was agreed between the department, NHS England and the Association of the British Pharmaceutical Industry (ABPI). VPAS has driven significant improvements in patient access to clinically and cost-effective medicines, while ensuring sustainable and predictable spend growth for the NHS and industry during a period of economic uncertainty. The government remains firmly committed to working with the pharmaceutical industry to create an environment that facilitates the development of medicines in the UK and supports rapid patient access to innovative medicines for NHS patients.

The 2019 VPAS agreement expires at the end of 2023. The department is negotiating to agree with industry a successor to VPAS to take effect from 1 January 2024. We are seeking to reach a new voluntary agreement that benefits all sides, desiring a partnership approach with industry through a voluntary scheme which would sit alongside a statutory scheme. These proposals and consultation on the statutory scheme are independent from voluntary scheme negotiations, and do not prejudge the outcome of those negotiations.

Earlier this year we updated the statutory scheme and increased the payment percentage for 2023 onwards. Historically, we have regularly made these routine changes to ensure that there has been broad commercial equivalence between the statutory scheme and VPAS, including earlier this year. With negotiations ongoing, there cannot currently be a default assumption of continuing alignment with any potential voluntary scheme provisions, though should a successor scheme to VPAS be agreed we intend that the 2 schemes should continue to work in a complementary way. The proposed updates to the statutory scheme in this document are therefore intended to ensure the scheme can continue to meet its objectives from 2024 onwards, whether this is alongside a successor voluntary scheme or as a standalone scheme in the absence of this.

The consultation sets out proposed amendments in 3 main areas:

• increasing the allowed growth rate which will have the effect of changing the payment percentages
• revising which sales of branded medicines are exempt from scheme payments
• these amendments could be implemented under a structure similar to that of the current statutory scheme or alongside a new approach to control spending on older branded medicines (the ‘lifecycle adjustment’)

The consultation sets out proposals to clarify the treatment of biological medicinal products (biological products or biological medicines).

In proposing these updates, consideration is also being given to the Secretary of State’s public sector equality duty and duties under sections 1 to 1GA of the National Health Service Act 2006 (NHS Act). This consideration is set out in the ‘statutory duties’ section, with additional information provided in the accompanying impact assessment (IA).

Introduction

The statutory scheme is one of 2 schemes, alongside the voluntary scheme for branded medicines pricing and access (VPAS), that control the prices of branded medicines to the NHS. It was established in its current form in 2018 when, following a consultation, it changed from operating as a price cut scheme to operating as a payment scheme.

Any company that supplies eligible branded health service medicines is subject to the statutory scheme unless they opt to join VPAS or a future voluntary scheme.

VPAS is the latest in a series of voluntary agreements to control NHS spend on medicines going back to 1957. It was agreed between the department, NHS England and the ABPI.

VPAS has driven significant improvements in patient access to clinically and cost-effective medicines, while ensuring sustainable and predictable spend growth for the NHS and industry during a period of economic uncertainty. The government remains committed to working with the pharmaceutical industry to enable an environment that facilitates the development of medicines in the UK and supports rapid patient access to innovative medicines for NHS patients.

The department administers the 2019 VPAS and the statutory scheme on behalf of all UK nations and the payments that companies make under the scheme in respect of the UK are allocated to each of the 4 countries on an agreed basis each year.

The 2019 VPAS agreement expires at the end of 2023. The department is negotiating to agree with industry a successor to VPAS to take effect from 1 January 2024. We are seeking to reach a new voluntary agreement that benefits all sides, desiring a partnership approach with industry through a voluntary scheme that would sit alongside a statutory scheme. The statutory scheme is intended to act either together with a voluntary scheme, or as a standalone if no voluntary scheme is agreed.

The overarching policy objectives of the statutory scheme, as set out in a 2019 review of the regulations, are to:

• limit the growth in costs of branded health service medicines to safeguard the financial position of the NHS
• ensure medicines are available on reasonable terms, accounting for the costs of research and development
• deliver the above objectives in a way consistent with supporting both the life sciences sector and broader economy

The statutory scheme works by limiting the growth in allowed sales of branded medicines. Since it took its current form in 2018, payment percentages have been set to keep net sales growth for sales of branded medicines subject to the scheme to an allowed growth rate of 1.1% (nominal) per year.

The payment percentage was last updated in April 2023. In that update, the payment percentage for 2023 and all subsequent years was set at 27.5%.^{[footnote 1]}

Payment exemptions apply in some instances, subject to satisfaction of relevant conditions. Exemptions apply to:

• sales of pharmacy only (P) and general sales list (GSL) medicines
• small companies with under £5 million sales to the NHS each year
• sales of low-cost presentations costing less than £2^{[footnote 2]}
• parallel imports

Sales made under framework agreements and public contracts which were in effect as of 31 March 2018 are also exempt from payments. Sales made under framework agreements and public contracts which were entered into on or after 1 April 2018 but before 1 January 2019 are subject to a 7.8% payment percentage. All other sales made under framework agreements and public contracts are subject to the payment percentage set in the regulations.

This consultation sets out proposed amendments in 3 areas:

• increasing the allowed growth rate which will have the effect of changing the payment percentages
• revising which sales of branded medicines are exempt from scheme payments
• these amendments could be implemented under an approach similar to that of the current statutory scheme or alongside a new approach to control spending on older branded medicines (the lifecycle adjustment)

The consultation also sets our proposals to clarify the treatment of unbranded biological products.

Reason for proposed changes

VPAS and the statutory scheme work together to help to ensure value for money for the taxpayer and enable the NHS to continue investing in patients’ access to new medicines and non-pharmaceutical services, in a way consistent with supporting both the life sciences sector and broader economy. It is critical that the statutory scheme continues to achieve these aims when VPAS is due to expire at the end of 2023, whether or not a successor voluntary scheme is agreed.

This consultation sets out the government’s proposed approach to the statutory scheme from 2024, in order to ensure that it is able to be ready for either outcome and continue to meet its objectives in the future.

Firstly, we propose that it is necessary to reconsider the allowed growth envelope for the scheme so that we meet an effective balance between the 3 objectives of limiting the growth in costs of branded health service medicines, ensuring medicines are available on reasonable terms, and doing so in a way that is consistent with supporting both the life sciences sector and broader economy. The current statutory scheme payment percentage of 27.5%, which was set to control growth to a rate of 1.1%, will continue from 2024 onwards if no change is made to the regulations.

Secondly, we propose that it is necessary to reconsider the scheme exemptions to ensure that they best meet the needs of NHS patients. We consider that by updating the exemptions we can ensure that even in the absence of a successor voluntary scheme, protections exist to facilitate a market that incentivises patient access to innovative new medicines and vaccines, and that is resilient against exceptional events when they occur.

The amendments necessary to achieve the first 2 proposals may be achieved under a structure similar to that of the current statutory scheme, or alongside a lifecycle adjustment as set out below.

Thirdly, we consider whether there is a case for rebalancing the payment percentages paid by medicines at different stages of the product lifecycle (lifecycle adjustment or LCA). These proposals aim to create headroom for innovation and incentivise competitive markets by generating additional savings from older products in markets where there appears to be little or no competition in a market to secure value for the NHS.

We also seek views about the department’s proposal to clarify the treatment of unbranded biological products.

Relationship with the voluntary scheme

VPAS is due to expire at the end of 2023 and so we aim to update the statutory scheme in order to ensure that the statutory scheme is able to continue to meet its objectives in the future. The proposals set out in this consultation with regard to allowed growth and exemptions are intended to ensure the statutory scheme can continue to function effectively either alongside a successor voluntary scheme or as a standalone scheme in the absence of this.

The government is negotiating to agree a voluntary scheme with the pharmaceutical industry. The proposals set out in this consultation reflect the government’s intentions for the statutory scheme to function either alongside or in the absence of such a scheme

Should a successor scheme to VPAS be agreed, government intends that the statutory scheme should continue to work in a complementary way with any agreement made with the pharmaceutical industry. The government believes this is best achieved through continuation of the policy of broad commercial equivalence as far as possible between the 2 schemes in order to protect the stability and efficacy of both. Broad commercial equivalence means that government aims to set payment percentages in the statutory scheme that are comparable (but not necessarily identical) to those in the voluntary scheme.

We therefore propose that, in the event a voluntary scheme is agreed before publication of the government response to this consultation, the consultation response should take into consideration that agreement, with the result that government may amend certain details of our statutory scheme proposals to improve alignment with those agreed with industry under a voluntary scheme.

Question

Do you agree or disagree that in the event that a voluntary scheme is agreed, the statutory scheme should seek to maintain broad commercial equivalence as far as possible with the voluntary scheme?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Consultation proposal

Allowed growth rate

The statutory scheme works by setting payment percentages intended to maintain growth in net-branded sales (sales to the NHS of relevant branded medicines including parallel imports, net of payments made under the statutory scheme) to a target level against our forecast for branded medicine sales. Since 2018 the statutory scheme has had an allowed growth rate of 1.1% (nominal) each year, as compared to 2% (nominal) annual allowed growth in VPAS. From 2024, we propose to set payment percentages in the statutory scheme using a higher allowed growth rate of 2% (nominal), with growth controlled to this level each year.

When considering the appropriate rate of allowed growth for both the statutory and voluntary scheme, the government is required to consider both the need for medicines to be available for the NHS on reasonable terms and the costs of research and development. We have considered the evidence on the impact of different payment rates on life sciences growth, the overall fiscal path over the next 5 years, the needs of UK patients and the pipeline of upcoming treatments and other increased financial pressures on the NHS.

Continuing to control growth at 1.1% per year would, in the event that no successor to VPAS is agreed, result in an effective decrease in allowed growth for most companies as since 2019 the majority of sales have been covered by VPAS with a 2% allowed growth rate. While it remains appropriate to control overall growth in sales of branded health service medicines, doing so at a rate lower than that which was in effect for most companies over the previous 5 years, risks creating a commercial environment for the life sciences sector that may not fully reflect the objective of supporting the sector and the broader economy.

Conversely, raising the allowed growth rate above 2% per year increases the risk that net spend on branded medicine rises to the extent that there is resultant unsustainable budget pressure on the NHS. This could negatively impact the delivery of NHS services, and therefore on patient outcomes.

By contrast, increasing the level of allowed growth to 2% per year would maintain for most companies and for the NHS broadly the same commercial terms that have operated since 2019. While it would increase NHS net-spending within the statutory scheme as a result of lower payment percentages than currently set in the scheme, it would still maintain effective controls on the level of branded medicine spending.

The accompanying impact assessment considers the impact this change may have on the relationship between the commercial environment for medicines in the UK and inward investment. As with recent consultations on the scheme, we would be interested in consultation responses that consider, or provide evidence about, the link between the commercial environment for medicines and inward investment, such as research and development.

As set out in the accompanying impact assessment, we propose that the baseline from which allowed growth will be controlled reflects a weighted average of allowed growth in the statutory scheme and VPAS since 2019 (1.1% and 2% respectively) in line with their relative proportions of scheme memberships as of this year. The methodology section ‘Establishing a forecast allowed sales 2023 baseline’ of the accompanying impact assessment sets out further details on how this has been calculated.

These changes to the allowed growth rate at the baseline will see a reduction in payment percentages (and therefore revenues) compared to a counterfactual of continuing to control growth at 1.1%. We believe this is justified on the basis that it reflects an appropriate balance between cost control and value for money for the NHS and providing a higher level of return for UK life sciences companies.

Question

Do you agree or disagree with our proposals to increase the level of allowed growth in the scheme and to uprate the baseline from which allowed growth is controlled, which will change the payment percentages, as set out in our impact assessment of the changes?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Exemptions

The government proposes to introduce additional exemptions from payment for certain types of sales. Such exemptions are currently features of VPAS but not of the statutory scheme. Introducing them into the statutory scheme would ensure that companies can continue to benefit from such exemptions in the event that no VPAS successor is agreed.

The government proposes to introduce an exemption from scheme payments for sales of medicines containing a new active substance (NAS) for 36 months from the date of their first marketing authorisation, with the payment percentage for remaining sales in the scheme scaled to keep total net sales growth at 2%. This exemption applies in the 2019 VPAS.

The purpose of this proposal is to reward the development of innovative new drugs and to ensure that companies have a strong incentive to launch them quickly in the UK, improving NHS patient access to new branded medicines. Companies need to prioritise between different markets when launching new products. Evidence from VPAS metrics implies that the new active substance exemption is an effective mechanism for protecting new innovations from the impact of price controls during their uptake phase, and so provides an incentive for companies to prioritise launching a new product in the UK, and supports fast patient access to new innovations. This is suggested by an increase in the proportion of NAS qualified sales over the early years of the scheme.

Question

Do you agree or disagree that the statutory scheme should provide an exemption from payment for medicines containing a new active substance?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

The government proposes to introduce an exemption from scheme payments for centrally procured vaccines (CPVs). As in the 2019 VPAS, this will cover the sale of a vaccine that meets all the following criteria:

• for national immunisation programmes that are recommended by the Joint Committee on Vaccination and Immunisation (JCVI)^{[footnote 3]}
• procured by a central government body^{[footnote 4]}
• managed by the UK Health Security Agency (UKHSA) or a successor body

This change would mean sales currently classified as CPVs in VPAS would be classified in the same way within the statutory scheme, and their sales would not count towards measured sales in the statutory scheme. They would therefore not affect the level of measured growth in the scheme, which is one of the factors that determines the calculation of the payment percentage, nor would statutory scheme members be required to make payments on their sales of CPVs.

There are a number of reasons for this exemption.

Firstly, with respect to the rationale for the exemption applying only to JCVI recommended vaccines. Vaccines that are recommended for national vaccination programmes are required to meet a more stringent threshold for cost effectiveness than National Institute for Health and Care Excellence (NICE) approved medicines: vaccines must demonstrate cost effectiveness that is closer to the opportunity cost of quality-adjusted life year (QALY - a unit of health elsewhere in the NHS), than NICE approved medicines. This means that spending on vaccines recommended for use in vaccination and immunisation programmes is less likely to come at the cost of other equally (or more) effective healthcare spending than NICE approved medicines. The government therefore believes that it is appropriate to treat central procurements of vaccines differently from other forms of central procurement.

Secondly, with respect to the rationale for the exemption applying only to central procurement. Such procurements are funded by central government and not NHS spending. Given that the statutory scheme is designed to generate a rebate on NHS (and not central government) spending on medicines, it is appropriate to exclude these sales from the scheme. Furthermore, the department is responsible for both the operation of the statutory scheme and for the purchase of CPVs. Excluding CPVs from the scheme gives industry confidence that government will not use our purchasing power to influence measured sales, for example by purposefully adjusting the pattern of procurements of CPVs to benefit from higher rebates on such sales.

Thirdly, with respect to the rationale for the exemption applying only to vaccines managed by UKHSA or a successor. This criterion enables us to differentiate vaccines being purchased by central government on behalf of the NHS (where we consider it reasonable for payments to apply to protect the affordability of NHS medicines spending) from those that are purchased by central government for the purposes of a central government run and managed immunisation program (where we consider that such spend sit outside of the NHS budget and processes). Including this criterion provides a clear and unambiguous indicator that the vaccine has been centrally procured, so therefore qualifies for the exemption. We would be interested in consultation responses that consider whether the Secretary of State ought to have discretion to waive this requirement where management by UKHSA or a successor is not possible due to exceptional circumstances.

Question

Do you agree or disagree that the statutory scheme should provide an exemption for centrally procured vaccines (CPVs)?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Please include any comments you may have on whether the Secretary of State ought to have discretion to waive the exemption criterion for management by UKHSA or a successor where this is not possible due to exceptional circumstances.

The government proposes to introduce an exemption from scheme payments for exceptional central procurements (ECPs) into the statutory scheme. As in the 2019 VPAS, this will cover procurements of medicines which meet all of the following criteria:

• for the purposes of emergency preparedness, such as national stockpiles for the security of the nation or pandemic preparation
• conducted by a central government body
• managed by the UK Health Security Agency (UKHSA) or a successor body

This exemption would mean sales currently classified as ECPs in VPAS would be classified in the same way within the statutory scheme, and their sales would not count towards measured sales in the statutory scheme. They would therefore not affect the level of measured growth in the scheme, which is one of the factors that determines the calculation of the payment percentage, nor would statutory scheme members be required to make payments on their sales of ECPs.

There are a number of reasons for this exemption.

Firstly, with respect to the rationale for the exemption applying only to central procurements carried out for the purposes of emergency preparedness. The purpose of this exemption is to ensure the effective supply of medicines in the event of emergency situations such as pandemics. This exemption (in VPAS) functioned effectively during the COVID-19 pandemic and helped to facilitate the supply of critical COVID-19 therapeutics.

Secondly, with respect to the rationale for the exemption applying only to central procurement. Such procurements are funded by central government and not NHS spending. Given that the statutory scheme is designed to generate a rebate on NHS (and not central government) spending on medicines, it is appropriate to exclude these sales from the scheme. Furthermore, the department is responsible for both the operation of the statutory scheme and for the purchase of ECPs. Excluding ECPs from the scheme gives industry confidence that government will not use our purchasing power to influence measured sales, for example by purposefully adjusting the pattern of procurements of ECPs to benefit from higher rebates on such sales.

Thirdly, with respect to the rationale for the exemption applying only to procurements managed by UKHSA or a successor. As above, this criterion enables us to differentiate procurements by a central government body on behalf of the NHS (where we consider it reasonable for payments to apply to protect the affordability of NHS medicines spending) from those that are purchased by a central government body for exceptional purposes (where we consider that such spend sit outside of the NHS budget and processes). Including this criterion provides a clear and unambiguous indicator that a sale was centrally procured, and so therefore qualifies for the exemption. As with our proposals for CPVs, we would be interested in consultation responses that consider whether the Secretary of State ought to have discretion to waive this requirement where management by UKHSA or a successor is not possible due to exceptional circumstances.

Question

Do you agree or disagree that the statutory scheme should provide an exemption for exceptional central procurements (ECPs)?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Please include any comments you may have on whether the Secretary of State ought to have discretion to waive the exemption criterion for management by UKHSA or a successor where this is not possible due to exceptional circumstances.

Lifecycle adjustment mechanism: background and rationale

The medicines market relies on the ‘innovation paradigm’, meaning that new medicines achieve high prices at the start of their lifecycle, but lower towards the end. New innovations are awarded intellectual property (IP) protection that enables them to command this high price, typically above the opportunity cost to the NHS - meaning the NHS could produce more health gain if funds were allocated to alternative treatments instead of these new innovations. In return, older medicines are expected to face price competition from generics and biosimilars, resulting in prices falling towards the cost of supply, and below the opportunity cost to the NHS. When this occurs, the NHS can improve health with the innovation at a cost lower than alternative uses of the funds, enabling the NHS to achieve value and improve net health gain overall (over the whole product lifecycle) notwithstanding the loss of health gain in the early periods, while supporting innovation with high prices early in the lifecycle.

While this system has been instrumental in enabling innovation in and patient access to medicines, it does not always operate exactly as intended due to the complexities of the medicines market. In particular, there is evidence that many older products are not facing competition sufficient to reduce prices and so are continuing to be sold at a high price even in the later stages of the product lifecycle. As an example, VPAS presentation level returns for 2021 show a large proportion of the sales of older products (those launched before 2009) appear to be in single supplier markets with no competition. Of the total of​ £1.9 billion of sales of older biological products in 2021, 70% of the sales value was on single supplier products.​ Of the total of £1.2 billion of sales of older non-biological products required to be sold by brand name in 2021, 65% of the sales value was on single supplier products.​This increases the cost of medicines to the NHS and so increases scheme payment percentages required to keep growth to 2% per annum.

The current statutory scheme largely operates on a one-size-fits-all basis, with the same payment percentage charged regardless of how long a medicine has been on the market or whether that medicine is subject to competitive pressure on prices.

The government proposes consideration of options for how the statutory scheme payment percentages are set to distinguish between medicines at different stages in the product lifecycle or subject to different levels of competition. In doing so we aim to support the innovation paradigm by allowing for higher prices for new innovations but expecting lower prices for older products.

Through this consultation we wish to test the proposal that, by requiring additional payments from older products in markets where there appears to be little or no competition, we can create financial headroom to reduce the payments required on new innovations, and to provide a flat, lower payment for older products in more competitive markets. If achieved this would be a pro-innovation and pro-competition measure, rewarding suppliers of both innovative and competitive medicines in the UK.

We are therefore considering the introduction of a lifecycle adjustment (LCA) mechanism that would apply to older medicines only. Products subject to the LCA mechanism would be liable for a higher ‘supplementary’ payment percentage if operating in a market with lower competition, and a flat, lower LCA payment percentage if operating in a more competitive market. The intention is that the additional revenues generated from older products in less competitive markets would allow for a reduction in the headline payment percentage paid by ‘newer’ products, while still controlling overall sales growth to 2% each year.

The exemptions proposed as part of this consultation for (NAS, CPV and ECP) would form part of the statutory scheme both alongside our proposals for a LCA, or without a LCA.

Question

Do you agree or disagree with the principle that in relative terms payment percentages should be higher for older products when not subject to adequate competition, and lower for newer products and older products when subject to adequate competition?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Lifecycle adjustment: defining older and newer products

Within this consultation the following definitions are used, however these are not fixed parameters and may be altered as a result of consultation responses and further development work undertaken to finalise the policy proposals.

We propose to define an ‘older’ product as any product where the active substance has been marketed in the UK for at least 12 years, defined from the first marketing authorisation date for a medicine containing that active substance. For example, were a company to launch a branded medicine in which the active ingredient was paracetamol, this would be defined as an ‘older product’ since, medicines containing paracetamol as their active substance have been marketed in the UK for longer than 12 years.

Consequently, we propose to define newer products as any product where the active substance has been marketed in the UK for less than 12 years.

Twelve years is chosen as it loosely reflects the average length of exclusivity/patent period, albeit this varies case-by-case^{[footnote 5]}. While we recognise that there will be some products whose IP has expired earlier than 12 years and others whose IP will expire later than 12 years, our intention is not to define an older product such that it perfectly reflects IP but rather such that it is an easy to operationalise proxy for the time in a product lifecycle where we would ordinarily expect to see average selling prices start to fall. This approach is intended to support the aims of the scheme since it supports competition, which in turn reduces costs, facilitates the availability of medicines on reasonable terms and supports competitiveness in the UK life sciences industry.

We recognise that IP law is complex and multifaceted and that multiple elements of a product might be protected at different points in time. We consider that it is proportionate for the statutory scheme to therefore adopt a simple definition of an older product, defined with respect to the active substance rather than any other feature such as the age of the brand, the indication or the mode of application, that avoids potential uncertainty or disputes. Whether a product is defined as older or newer for the purposes of the statutory scheme will have no bearing on whether that same product is able to exercise its IP rights, but will impact the payment percentage owed under the statutory scheme.

The proposed NAS exemption would complement the LCA, if both are adopted. A newer product will benefit from a 3-year exemption from payments from their marketing authorisation date, as set out above. Following this, the product will pay the headline payment percentage from years 3 to 12 following marketing authorisation. After 12 years, the product will pay one of 2 payment percentages, depending on the level of competition in that market (further details below).

Question

Do you agree or disagree with the definition of an older product as being any product where the active substance has been marketed in the UK for at least 12 years?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Lifecycle adjustment: details of proposal

We propose that whether older products are subject to the supplementary or to the lower payment percentages should primarily depend on whether there is adequate competition in a given market to ensure value for the NHS, subject to certain exceptions set out later in this consultation.

Products that are subject to lower levels of competition are unlikely to have seen meaningful price reductions in the later stages of their lifecycle. As a result, their suppliers are likely to be operating with significant profit margins and the NHS is likely to be continuing to pay a price that is above the opportunity cost for wider health spending. Government therefore believes that it’s reasonable for them to pay a higher payment percentage through the statutory scheme to recoup some of the value that the NHS would have expected to gain through price reductions under the innovation paradigm.

We propose that the supplementary payment percentage, applied to older products that are subject to lower levels of competition, is 36% in 2024, rising to 38% in 2025, and to 40% in 2026 (see table 2).

These rates are chosen to represent an approximation of the expected price decline following competitive market entry. For example, where we have seen biosimilar entry, prices of high-spend biological medicines have been observed to fall by between 20 to 50% up to 3 years following market entry. The method by which these values have been calculated is through analysis of historic data for spend on all available molecules where we can observe at least one year of spend pre loss of exclusivity date and 3 years of spend post loss of exclusivity date. Plotted data was used to review and identify the proportional change in spend at the point spend stabilises. The proposed year-on-year increase reflects that according to current forecasts sales growth will outstrip allowed sales growth, and therefore that scheme payment percentages will need to increase accordingly.

We acknowledge there will be some cases of older products operating in markets with low levels of competition, but without operating with significant profit margins where a high payment percentage may be challenging to absorb in full. However, the viability and supply of such products can be maintained through standard price increase processes as required.

Products that are subject to adequate competition are comparably likely to have seen meaningful price reductions in the later stages of their lifecycle. As a result, their suppliers are more likely to be operating with slimmer profit margins and the NHS is likely to be paying a price that is below the opportunity cost for wider health spending. Government therefore believes that it is reasonable for sales of such products to be subject to lower payment percentage that reflects the significant value competition already provides to the NHS.

Even where competition is present in branded markets, our evidence suggests that the levels of cost reduction remain lower than those seen in unbranded generics markets. We therefore consider that it remains appropriate to apply a payment percentage even in competitive markets, but at a lower rate. We propose that this lower payment percentage is fixed at flat rate of 10% (see table 2 below). This rate would represent a significant reduction in the rebate for these products compared to recent years, responding to concerns articulated by manufacturers of branded generics and biosimilars that higher payment percentages could discourage future product launches. The proposed payment percentage does not grow year on year, which has additional benefit in this category as it removes the requirement that companies include a future payment percentage risk premium when setting their prices on competitive multi-year tenders or framework agreements. We consider that the level of 10% is appropriate, as it is within the range of rates that have been previously set within the statutory and voluntary schemes without causing issues for products operating in competitive markets.

Question

Do you agree or disagree with payment percentages proposed for the supplementary rate?

• Agree
• Disagree
• Don’t know

Do you agree or disagree with payment percentages proposed for the lower rate?

• Agree
• Disagree
• Don’t know

Please explain your answers and provide evidence to support further development of our analysis.

Measuring competition is not straightforward. There are many factors that determine whether or not a market is competitive, and whether that competition is driving lower prices and ensuring value for the NHS. We would particularly welcome consultation feedback on whether our proposed approach to defining a competitive market for the purposes of the LCA meets an appropriate balance between specificity and simplicity.

We propose to define a competitive market as any market where no single company (or group of companies with the same parent company) controls greater than 80% of sales quantity (that is, units as opposed to packs) measured at individual generic presentation level (also known as virtual medicinal product or VMP) when measured UK wide.

We propose to measure competition at VMP level, since individual presentations of a product may not be fully interchangeable such that price competition does not occur between different presentations of the same medicine.

We propose to set the threshold for competition at under 80% market share. While this is a relatively low threshold for judging a market to be competitive it reflects the high level of complexity in determining competition and the variation in how competition operates within the market for medicines. Given this, it is appropriate that we set the threshold for what a competitive market is at a lower level than we might otherwise, to mitigate the risk of judging that the market for certain products is uncompetitive according to our definition despite price competition being apparent for that medicine at VMP level.

We propose to measure the competitiveness of a market based on share of total sales quantity rather than sales value because markets where volume is distributed across suppliers are both more resilient and tend to see greater price competition.

Subject to the below exceptions, sales of an older product will be subject to the supplementary payment rate if the relevant market for that relevant individual generic presentation does not meet this definition of a competition.

In order to make an accurate and up to date determination of a supplier’s share of sales of a particular product, we propose to collect information on quarterly sales data at individual presentation level. Currently this data is only collected on an annual basis.

When considering the competitiveness of a market, we intend to take into consideration not just whether any single company controls over 80% market share, but any commercial arrangements that one or more companies might have in relation to that market that may be relevant to its competitiveness. Competition is relevant to the status of products under the LCA insofar as we have a reasonable expectation that competition ought to drive down prices. It is therefore important that any measure of competition is sensitive to the potential that commercial arrangements may exist between different products or companies; in certain scenarios multiple products may be operating in the same market without meaningful price competition as a result.

We propose therefore to treat any market where 2 or more companies that share a commercial arrangement control more than 80% market share, even if no single product controls more than 80% of the market in its own right, as not meeting our definition of a competitive market. We propose to define a commercial arrangement as any arrangement (including but not limited to an agreement, decision or concerted practice) between suppliers that relates to one or more product in scope of the LCA and which has as its object or effect the restriction, prevention or distortion of competition within the UK.

Examples of the kinds of arrangements we might propose to treat as not resulting in meaningful competition include:

• where the same product is sold under different brand names by companies that are members of a single group of companies with the same parent company
• where a product is sold by 2 separate companies under a licensing arrangement in which one company licenses another to market the same product
• where 2 or more companies develop a product as part of a joint venture and market the product separately within the same market
• where one company sells a product and offers an inducement to another company to market a competitor product within the same market

Question

Do you agree or disagree with how we propose to define the competitiveness of markets for older medicines?

• Agree
• Disagree
• Don’t know

Do you have any further comments on how we propose to define the competitiveness of markets for older medicines?

Question

Do you agree or disagree with the proposal to collect supplier’s quarterly sales data at individual presentation level?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

We propose certain exceptions to the principle that the payment status of older medicines is determined by the competitiveness of the market in which they are operating.

We consider that it would be appropriate to treat differently those non-biological (often referred to as ‘small molecule’ medicines) that are branded by the choice of the marketing authorisation holder, rather than by regulatory requirement. Such products, even if subject to competition, are choosing to do so under a brand name that confers certain commercial advantages when they could otherwise choose to do so under a generic name. We therefore propose that the supplementary rate is applied to all such products regardless of the competitiveness of the market in which they are operating. We believe this is justified since branded products have a competitive advantage over unbranded generics. This advantage arises as branded products may be prescribed or requested by patients by their brand name, enabling manufacturers of such products to maintain a higher price without necessarily losing as much market share as they would do otherwise. We propose that this approach applies only to small-molecule medicines as biological products are subject to a general requirement to have a brand name.

We propose to define a category of older products as ‘new competitor products’. These are branded generic or biosimilar versions of older brand originators, when launching in the UK under a new brand for the first time.

We consider that it would be appropriate to treat new competitor products differently from other branded generics and biosimilars. The LCA mechanism is designed to incentivise competitive markets, and this requires removing barriers to the launch of new competitors to older branded medicines. As such, we propose that any new competitor product launched into an existing market (a market where the originator product has been marketed in the UK for more than 12 years) for the first time ^{[footnote 6]} will be subject to the lower payment percentage^{[footnote 7]} for the first 12 months after launch even if they are launching into a market that is non-competitive and would otherwise attract the supplementary rate.

The intention of this exemption is to give such companies time to establish market share without being penalised for the prior lack of competition within that market. After the 12 months has elapsed, they will pay either the lower or supplementary rate, depending on whether competition has been successfully established in that market. Without this, we consider there would be a disincentive to launch new competitor products, since without this exception, they would pay at the higher rate until they could establish sufficient market share such that the dominant supplier controls less than 80% of the total market.

Should a new competitor product launch earlier than 12 years after the first marketing authorisation of the active substance in that product, they would be treated in the same way as the existing products containing that substance: they would be treated as a ‘newer’ product until 12 years after the first marketing authorisation and have access to the headline rate until that point.

A biosimilar or branded generic is only defined as a new competitor if the active substance has been marketed in the UK for at least 12 years.^{[footnote 8]} Prior to this any version of that product, including a biosimilar or branded generic, will be subject to the headline payment percentage.

We consider that it would be appropriate to treat differently blood and plasma derived products. Blood and plasma derived products are a strategically important category that has consistently been subject to global supply constraint over an extended period of time. We therefore propose that all older blood and plasma derived products should be subject to the lower payment percentage regardless of the level of competition in the market.

Table 1: statutory scheme lifecycle adjustment product groups

Does a single supplier control more than 80% of the market?	Small molecule branded by choice	Small molecule required by the regulator to be sold by brand name	Biological products	Blood and plasma derived products
No	Supplementary payment percentage	Lower payment percentage	Lower payment percentage	Lower payment percentage
Yes (and product is not a new competitor within 12 months of launch)	Supplementary payment percentage	Supplementary payment percentage	Supplementary payment percentage	Lower payment percentage
Yes (and product is a new competitor within 12 months of launch - see note)	Supplementary payment percentage	Lower payment percentage	Lower payment percentage	Lower payment percentage

Note: so long as that product does not itself achieve greater than 80% market share within the first 12 months.

Question

Do you agree or disagree with our proposed approach to small molecule medicines that are branded by choice?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Question

Do you agree or disagree with the proposed exception for products launching into an existing market for the first time for up to 12 months?

• Agree
• Disagree
• Don’t know

Do you agree or disagree with the proposed exception for blood and plasma derived products?

• Agree
• Disagree
• Don’t know

Do you have any further comments on our proposed approach to exceptions for products launching into an existing market, and for blood and plasma derived products?

Proposed payment percentages

This section sets out the payment percentages proposed under each of our 2 lead approaches: a statutory scheme based on allowed growth of 2% with and without a LCA mechanism. For both approaches we propose payment percentages that take account of the relevant new scheme exemptions proposed. Proposed payment percentages are indicative because they are based on calculations using data up to quarter 4 (Q4) 2022 and so may be subject to revision as additional data from 2023 becomes available.

We have proposed to set payment percentages for 3 years from 2024 to 2026, with the 2026 payment percentages continuing until such time as further change is made. Setting payment percentages for 3 years (and not beyond) reflects that there is inherent uncertainty surrounding forecasts of medicines sales and is consistent with the approach taken by the department in the comparable 2018 consultation on the scheme. We will review updated data on medicine sales and forecasts as they become available and update the scheme payment percentages accordingly.

For the non-LCA approach, payment percentages are set for each year at the rate calculated in accordance with our sales forecast to result in net sales being in line with an allowed growth rate of 2%. To this end, according to the current forecast, we propose a payment percentage of:

• 21.7% in 2024
• 23.7% in 2025
• 26.6% in 2026

For the LCA approach, payment percentages for older products are to be set as proposed in the above sections. The headline payment percentage for newer products is subsequently calculated in accordance with our sales forecast to result in net sales being in line with an allowed growth rate of 2% when taking account of the additional revenue estimated to be generated from the LCA. To this end, according to the current forecast, we propose a headline payment percentage of:

• 9.7% in 2024
• 11.1% in 2025
• 15.4% in 2026

This would be paid by newer products, those where the active substance has been marketed in the UK for less than 12 years.

Table 2: indicative payment percentages (2% allowed growth, assuming inclusion of NAS, CPV and ECP exemptions)

	2024	2025	2026
Without the LCA	21.7%	23.7%	26.6%
With the LCA: headline payment percentage	9.70%	11.1%	15.4%
With the LCA: older products with competition (lower payment %)	10.0%	10.0%	10.0%
With the LCA: older products with low competition (supplementary payment %)	36.0%	38.0%	40.0%

Impact of proposed payment percentages

The impact assessment published alongside this consultation sets out how our proposals aim to ensure that the continued effectiveness of the statutory scheme from 2024.

Question

Do you agree or disagree with the payment percentages proposed in the non-LCA scenario?

• Agree
• Disagree
• Don’t know

Do you agree or disagree with the headline payment percentages proposed in the LCA scenario?

• Agree
• Disagree
• Don’t know

Please explain your answers and provide evidence to support further development of our analysis.

Question

Do you have any comments on the proposed methodology used in determining the payment percentages (as set out in the impact assessment)?

Please give reasons and provide any evidence or analysis that would support any refinement you think the government should make.

Unbranded biological products

To protect patient safety, biological medicinal products (‘biological products’ or ‘biological medicines’) are subject to different branding requirements to other medicines and do not experience competition in the same way as non-biological (‘small molecule’) medicines. These are related to the additional pharmacovigilance needs and the variability inherent in the production process for biological medicines.

Medicines and Healthcare products Regulatory Agency (MHRA) guidance states that all biological medicines, including biosimilars, should be prescribed by brand name. This is different for non-biologics, where the presumption is that products should be prescribed by the generic name by default. As such, post-patent intra-molecule competition operates differently between biological and non-biological medicines. While the vast majority of biological medicines are branded, a small number have been permitted to be marketed without a brand name. When prescribed, these unbranded products are often prescribed by both the generic name and the marketing authorisation holder name, such that the dispenser will supply a specific product in the same way as they would for a prescription for a branded product. This has raised a question about whether the statutory scheme should apply to all biological medicines, or only to those marketed under a brand name.

We propose to clarify that the statutory scheme should be applied to all biological medicines, whether or not they are marketed under a brand name. This will respond to the current uncertainty about treatment of these medicines, and ensure the equal treatment of and fair competition between all biological medicines.

The department believes that, given that biological medicines should be prescribed by brand name, the statutory scheme should not create an unintended incentive for companies to remove their brand name. Unlike for non-biological medicines, unbranded biologicals do not tend to promote competitive markets. This is because prescribers are advised to include the name of the marketing authorisation holder on prescriptions for unbranded biological medicines.

Furthermore, given the exceptionality of unbranded biological medicines, we consider that equal treatment across all biological medicines promotes fairer competition by removing the possibility that otherwise equivalent versions of the same product are subject to different commercial terms solely because of the terms of their marketing authorisation. As long as there is a general requirement for biological products to carry a brand, there is a risk of unequal competition between branded versions of a product and any version that can be sold without a brand name. Promoting fairer competition supports the objectives of the scheme, since such competition is likely to reduce cost to the NHS and support resilience of supply.

As such, government considers it appropriate that all biological medicinal products - whether branded or not - are included within the scope of the statutory scheme in future. We therefore consider that it is appropriate to apply the statutory scheme to non-branded biological medicines.

Government considers that this rationale applies only to biological medicinal products since, in most cases, suppliers of older branded non-biological medicines can de-brand if commercially advantageous to do so. As such, government is not proposing any change in scope of the statutory scheme in relation to non-biological medicines marketed without a brand name.

Question

Do you agree or disagree that the government should apply the statutory scheme to both branded and non-branded biological medicines from 1 January 2024?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Impact of the proposal

The impact assessment (IA) published alongside this consultation sets out that proposals will help to ensure the continued effectiveness of the statutory scheme.

Specific consultation requirements in the NHS Act

The statutory scheme was established using powers under section 263(1) of the NHS Act 2006. The Health Service Medical Supplies (Costs) Act 2017 amended the NHS Act 2006 to include requirements that consultation about the exercise of powers in section 263(1) must include consultation about the:

• economic consequences for the life sciences industry in the United Kingdom
• consequences for the economy of the United Kingdom
• consequences for patients to whom any health service medicines are to be supplied and for other health service patients

An assessment of the likely impact of the proposals, including on the above areas, is set out in the IA which accompanies this consultation.

Question

Do you agree or disagree with the analysis in the impact assessment of our proposals, including impacts on those areas where the NHS Act 2006 requires that we consult?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

Statutory duties

There are some specific duties that must be considered when proposing updates to the statutory scheme. These include consideration of the Secretary of State’s duties under the NHS Act 2006, the public sector equality duty under the Equality Act 2010 and the Family Test.

Duties under the NHS Act 2006

1. To promote a comprehensive health service (section 1 NHS Act 2006)

The Secretary of State is required to continue the promotion in England of a comprehensive health service designed to secure improvement in:

• the physical and mental health of the people of England
• the prevention, diagnosis and treatment for physical and mental illness

The proposed approaches to amend the statutory scheme (which include increasing the allowed growth rate which has the effect of altering the payment percentages, revising which sales of branded medicines are exempt from scheme payments, and a new approach to control spending on older branded medicines, the LCA) from 2024 will mean the department will receive lower statutory scheme payments than currently set out in the regulations.

While receiving lower payments might not intuitively appear to promote a comprehensive health service, we suggest the amount proposed will ensure the department receives the appropriate amount in payments in line with adjusted forecasts, to stay within our financial envelope. These payments will be apportioned to the NHS across the UK and will be used in the best interest of patients.

Under the revised scheme, growth will be controlled at a rate of 2% per year, ensuring the ongoing affordability of NHS medicines spending and supporting the ability of the NHS to continue investing in patient access to medicines.

Updating the payment percentage (either with the LCA, or without the LCA) will also ensure the objectives of the scheme continue to be met either alongside or in place of a future voluntary scheme. The effective operation of both schemes means that the department can continue to receive an appropriate amount in payments from industry and that the scheme can continue to fulfil their broader objectives of supporting the life sciences sector, and the wider economy.

In contrast, if the department were to proceed with the ‘do nothing’ of rolling over a payment percentage that was set for 2023 only, and that includes within its calculation an adjustment for the 2022 VPAS scheme amendment that was intended to be a one-off, we consider that the statutory scheme may not be perceived as a viable alternative to the voluntary scheme. This could impact upon the stability of the statutory scheme and so the perceived stability of the UK as a market for the life sciences industry.

Moreover, where companies consider that they cannot supply medicines to the NHS in a way that is economic for them, they will continue to be able to request a price increase from the department. If the department was to proceed with the ‘do nothing’ option we would expect that the department would receive more price increase requests. Price increase requests are a way in which companies highlight where they have concerns about the provision of a particular medicine at the price agreed with the department.

If the department were to accept these potential additional price increase requests, it would clearly have an impact on the NHS’s budget for spending on branded medicines. On the other hand, if the department were to refuse them it may have a negative impact on companies’ ability to continue selling certain branded medicines to the NHS. This is why we consider that the proposed changes to the allowed growth rate best advance the Secretary of State’s duty to promote a comprehensive health service.

We also consider that the proposals in the consultation support this duty: the introduction of the CPV exemption supports the supply of, and access to, vaccines further ensuring a comprehensive health service. Similarly, the introduction of an exemption for ECPs will support the government to meet this duty under emergency circumstances.

We therefore consider that the proposed changes best advance the Secretary of State’s duty to promote a comprehensive health service and support the relationship between the Secretary of State and industry, ensuring that the statutory scheme has the confidence of all parties involved.

2. To act with a view to securing continuous improvement in the quality of services (section 1A of the NHS Act 2006)

The Secretary of State is required to exercise his NHS functions with a view to securing continuous improvement in the quality of services provided to individuals.

Taking steps to ensure the scheme can continue to meet its objectives from 2024 onwards will ensure continued effective operation of and confidence in the statutory scheme.

This will help to ensure sales growth continues to be controlled, allowing the NHS to budget effectively and make decisions in the best interest of patients about the provision of services, including ensuring a quality service.

We are committed to an ongoing review process in order to update the regulations to ensure they continue to align with the overarching policy objectives of the statutory scheme.

In discharging this duty, the Secretary of State must have regard to the National Institute for Health and Care Excellence (NICE) quality standards which define quality and quality improvement for particular kinds of care and treatment. As set out above, a decision to update the payment percentage helps to ensure the effective operation of the schemes and ensures NHS costs are controlled, supporting the Secretary of State to meet duties in securing continuous improvement in quality of services.

3. To have regard to the NHS Constitution

Regard must be given to the values, principles, pledges and rights in the NHS Constitution.

The NHS Constitution has been taken into account when developing the proposals in this consultation. In particular, this has included considering the following principles:

• principle 1: the NHS provides a comprehensive health service available to all
• principle 4: the patient will be at the heart of everything the NHS does
• principle 6: the NHS is committed to providing the best value for taxpayers’ money

We have also considered these proposals in the context of the constitution’s pledges to, and the rights of, NHS patients. In particular, this has included consideration of the rights in relation to nationally approved treatments, drugs and programmes, which set out patients’ rights to:

• drugs and treatments that have been recommended by NICE for use in the NHS, where the patient’s doctor says they are clinically appropriate.
• to receive the vaccinations that the JCVI recommends that patients should receive under an NHS-provided national immunisation programme

As set out above, a decision to make changes to the statutory scheme (which include increasing the allowed growth rate so therefore changing the payment percentages, revising which sales of branded medicines are exempt from scheme payments, and a new approach to control spending on older branded medicines, the LCA) help to ensure the effective operation of the statutory scheme which is to the benefit of the NHS and industry and means that appropriate payments are made to the health service. This supports the NHS to provide a more comprehensive health service by allowing the NHS to continue to invest in pharmaceutical and non-pharmaceutical services. It also ensures access to medicines recommended by NICE as clinically and cost effective for patients and therefore value for money to the NHS and taxpayers.

Our proposals to exclude central procured vaccines from the scheme are also designed to ensure that patients continue to have access to vaccinations recommended by the JCVI.

4. To have regard to the need to reduce health inequalities (section 1C NHS Act 2006)

With their functions in relation to the NHS, the Secretary of State must have regard to reducing inequalities between the people of England with respect to the benefits that they can obtain from the NHS.

We do not envisage any negative impacts on health inequalities as a result of the proposal. Ensuring the continued sustainability of NHS medicines spending is critical to enabling the NHS to provide widespread access to medicines and respond to health inequalities.

5. To promote research (section 1E NHS Act 2006)

In exercising his functions in relation to the NHS, the Secretary of State must promote:

• research on matters relevant to the NHS
• the use in the NHS of evidence obtained from research

The proposed approach will ensure the long term sustainability of NHS medicines spend and the use of medicines in the UK. Sustainable growth in sales allows the NHS to invest in innovative products, in clinical research and in process innovation. Some elements of the proposal, namely the inclusion of the NAS exemption and LCA are designed to allow the NHS to invest in and reward innovative products, through lower payments for newer and innovative medicines.

The department considers that research and development investments leads to ‘spillover’ effects - for example, through the generation of knowledge and human capital - which generate net societal benefits, compared to other companies spending their capital on other things. In addition, research and development investment could lead to improved medicines in the future that would be of benefit to patients and the health service.

Any additional revenues accruing to the pharmaceutical industry when compared to the counterfactual are assumed to be invested in the same proportion as companies typically invest in areas such as research and development in the UK. Given this, and the small size of the additional revenues expected to accrue to the pharmaceutical industry as a result of these changes, we expect only limited positive impacts on research and development investment and associated spillovers when compared to the counterfactual.

Government has previously received and considered evidence about the relationship between the commercial environment and inward investment. Government remains open to receiving further evidence about this relationship in responses to this consultation.

6. To secure education and training (section 1F NHS Act 2006)

The Secretary of State must exercise his NHS (and other) functions to secure an effective system for the planning and delivery of education and training for the persons employed, or considering becoming employed, in the NHS or connected activities.

We have considered this duty in relation to our proposals and do not consider that they would affect education and training.

7. To review treatment of providers (section 1G of the NHS Act 2006)

The Secretary of State is required to keep under review any matter which might affect the ability of healthcare providers to provide NHS services or the reward available to them for doing so.

We do not consider the proposals would affect the ability of healthcare providers to provide NHS services or the reward available to them for doing so.

8. To report on workforce systems (Section 1GA - of the NHS Act 2006)

The Secretary of State must, at least once every 5 years, publish a report describing the system in place for assessing and meeting the workforce needs of the health service in England.

We do not consider this duty to be affected by the proposals in this consultation.

Public sector equality duty

This duty comprises 3 equality objectives, each of which needs to be considered separately. Ministers have regard to the need to:

• eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under the Equality Act 2010
• advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it
• foster good relations between persons who share a relevant protected characteristic and persons who do not share it

The protected characteristics covered by this duty are age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.

We believe that overall, our proposals will have a broadly positive impact on the equality objectives. This is because, by updating the statutory scheme, we are ensuring that the statutory scheme continues to function as a viable scheme and can meet its objectives in relation to safeguarding the NHS budget and ensuring medicines are available while supporting the life sciences sector. We consider that meeting these objectives is in the interest of all patients and therefore likely to benefit those who share protected characteristics.

The proposals would mean that the NHS can continue to use its funds, including revenues from the statutory scheme, in the best interest of patients, including those with protected characteristics. The proposals may reduce revenues from the scheme compared to making no changes, which might be used to invest in other NHS services that also benefit patients. However, on balance these changes are designed to protect patient’s access to have clinically and cost-effective medicines, including innovative new medicines which may benefit individuals with specific protected characteristics.

In particular, we believe that ensuring the sustainability of the medicines pricing system and securing access to medicines is likely to benefit specific groups where illness and use of medicines tend to be higher than in the rest of the population. These groups include those sharing protected characteristics, such as older people and those with disabilities and long term health conditions.

Moreover, the changes are designed to ensure the long term sustainability and viability of the UK medicines pricing schemes. The proposals would ensure that growth continues to be controlled at 2% each year, allowing the NHS to invest in other services that benefit patients.

The Family Test

The Secretary of State must consider, where sensible and proportionate, whether to apply the family test, when making policy. The Family Test questions are:

• what kind of impact might the policy have on family formation?
• what kind of impact will the policy have on families going through key transitions such as becoming parents, getting married, fostering or adopting, bereavement, redundancy, new caring responsibilities or the onset of a long term health condition?
• what impacts will the policy have on all family members’ ability to play a full role in family life, including with respect to parenting and other caring responsibilities?
• how does the policy impact families before, during and after couple separation?
• how does the policy impact on those families most at risk of deterioration of relationship quality and breakdown?

We have considered the Family Test and believe the proposals will not have a negative impact in relation to any of the relevant questions.

Our proposals would ensure the sustainability of the statutory scheme and ensure that the costs of medicines to the NHS are controlled to affordable levels and patients continue to have access to medicines. This will help support family members who require medicines and their carers to play a full role in family life through access to medicines and any services required through the NHS.

Conclusion on statutory duties

We believe that the proposals will help to ensure the Secretary of State continues to promote a comprehensive health service. The proposed changes ensure the long term sustainability of the statutory scheme which, in turn, supports the sustainability of NHS spending on medicines and patients’ access to these medicines.

Question

Do you agree or disagree with our initial conclusions about the impact that the proposed updates to the statutory scheme will have when taking into account the statutory duties of the Secretary of State?

• Agree
• Disagree
• Don’t know

Please explain your answer and provide evidence to support further development of our analysis.

How to respond

The consultation will run until 10 October 2023. We welcome responses from any interested person, business or organisation.

The easiest way to respond is by completing the online survey.

If you have additional evidence you wish to submit or are unable to use the online form, email statutory_scheme_consultation@dhsc.gov.uk. Do not send any personal information to this email address.

Privacy notice

Summary of initiative or policy

The Department of Health and Social Care (DHSC) proposes to update the payment percentages in the statutory scheme for branded medicine pricing (known as the ‘statutory scheme’).

Data controller

Department of Health and Social Care is the data controller.

What personal data we collect

We will be collecting information in relation to the following:

• the capacity a person is responding to the survey. That is, if the respondent is sharing their personal views and experiences, their professional views and experiences, or responding on behalf of an organisation
• if the person is responding as an individual, we collect information on their protected characteristics (age, sex, whether they consider themselves to have a disability or not, and so on). It will not be mandatory for individuals to provide this information in order to respond to the policy questions in the consultation
• if the person responding as an individual is sharing their professional views and experience, we will collect information on what sector they work in (the NHS, elsewhere in the public sector, private or voluntary sector and so on). It will not be mandatory for individuals to provide this information in order to respond to the policy questions in the consultation
• alternatively, if the person is responding on behalf of an organisation, we collect information on the type of the organisation they are responding as (for example whether it is a pharmaceuticals company who is a member of either branded medicine pricing scheme, sector representative organisation, charity, NHS organisation and so on)
• whether they would like to receive information on other consultations carried out by DHSC
• the individual or organisation’s email address. It will not be mandatory to provide this information in order to respond to the policy questions in the consultation

How we use your data (purposes)

We will collect personal information via the survey for the consultation. If you write or email us directly then we will collect your personal information via this channel.

We need to hold your information to understand what capacity you are responding as this is crucial in our analysis of how our proposals will affect different individuals and organisations.

We ask you to provide your email address for the following reasons:

• if you need to contact us about amending or deleting your response the only way, we can verify that it is your response is via your email address
• if our policy team have a follow-up question to ask you, we can contact you

We ask you to provide information about your protected characteristics so that we can understand the range of individuals represented in the response to the consultation, as we would like to ensure that a broad cross section of the population is included in the consultation.

Legal basis for processing personal data

Under Article 6 of the United Kingdom General Data Protection Regulation (UK GDPR), the lawful bases we rely on for processing this information are:

• (a) Consent: for the processing of email addresses
• (e) Public task (necessary to perform a task in the public interest or in the exercise of our official functions): for the processing of all other personal data

Under Article 9 of the United Kingdom General Data Protection Regulation (UK GDPR), the conditions we rely on for processing any special category data are:

• (h) Health and social care (necessary for the purposes of preventative or occupational medicine, the provision of health or social care treatment and the management of health or social care systems and services)

Data processors and other recipients of personal data

Personal data will only be shared internally within DHSC with employees involved in this consultation.

External organisations supporting DHSC in the analysis of consultation will only be given access to anonymised data.

International data transfers and storage locations

All data is stored on DHSC secured platforms

Retention and disposal policy

We will keep your information for one year and then will dispose of it from our DHSC secured platform.

How we keep your data secure

All data is stored on a secure DHSC platform and only people involved in the consultation will have access to this.

Your rights as a data subject

By law, data subjects have a number of rights and this processing does not take away or reduce these rights under the EU General Data Protection Regulation (2016/679) and the UK Data Protection Act 2018 applies.

These rights are:

1. The right to get copies of information - individuals have the right to ask for a copy of any information about them that is used.

2. The right to get information corrected - individuals have the right to ask for any information held about them that they think is inaccurate, to be corrected.

3. The right to limit how the information is used - individuals have the right to ask for any of the information held about them to be restricted, for example, if they think inaccurate information is being used.

4. The right to object to the information being used - individuals can ask for any information held about them to not be used. However, this is not an absolute right, and continued use of the information may be necessary, with individuals being advised if this is the case.

5. The right to get information deleted - this is not an absolute right, and continued use of the information may be necessary, with individuals being advised if this is the case.

Comments or complaints

Anyone unhappy or wishing to complain about how personal data is used as part of this programme, should contact data_protection@dhsc.gov.uk in the first instance or write to:

Data Protection Officer
1st Floor North
39 Victoria Street
London
SW1H 0EU

Anyone who is still not satisfied can complain to the Information Commissioners Office. Their website address is www.ico.org.uk and their postal address is:

Information Commissioner's Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF

Automated decision making or profiling

No decision will be made about individuals solely based on automated decision making (where a decision is taken about them using an electronic system without human involvement) which has a significant impact on them.

Changes to this policy

This privacy notice is kept under regular review, and new versions will be available on our privacy notice page on our website. This privacy notice was last updated on 18 July 2023.

1. As the update made to the payment percentage in 2023 did not take effect until 1 April 2023, an adjusted payment percentage of 28.6% was set for any company that made a payment in the first quarter of 2023 at the lower rate of 24.4%. The purpose of this is to give an overall average payment percentage equivalent to 27.5% for all scheme members in 2023 regardless of when sales took place during 2023. If the statutory scheme were to remain unchanged this profiling of the payment percentage would not occur again in 2024 and the 27.5% payment percentage would apply from 1 January 2024. ↩

2. Specifically, a list price below £2. ↩

3. Specifically recommendations under paragraph 13 of the JCVI terms of reference. ↩

4. The definition of a central government body would be in line with as that used in VPAS, which is that: a central government body means a government department, non-ministerial department or executive agency (but, for the avoidance of doubt, excludes a non-departmental public body such as, without limit, NHS England) as defined in the central government classification of the public sector classification guide, as published and amended from time to time by the Office for National Statistics. ↩

5. Where a manufacturer or supplier launches a new combination product containing 2 or more active substances, we propose that sales of such a new combination medicinal product will not be deemed to be a ‘newer product’ unless one of the active substances meets the definition of a ‘newer product’. ↩

6. This is limited to the first launch of a new competitor product only. Suppliers would not have the benefit of access to this period were they to withdraw and subsequently relaunch a product. Similarly, were a supplier to transfer ownership of a product to another supplier, the new owner of the product would not have access to this period for the product in question. ↩

7. With the exception of products that claim greater than 80% market share in their own right before the end of their first year (because they become dominant suppliers and so can charge greater prices), and with the exception of small molecule products that are branded by choice. ↩

8. If the active substance of a biosimilar or branded generic reaches 12 years from marketing authorisation within 12 months of that biosimilar or branded generic launching, then that biosimilar or branded generic will be defined as a new competitor only from when the active substance reaches 12 years from marketing authorisation, and only until the 12 months has elapsed from the launch date of that biosimilar or branded generic. ↩